Deregulation of Texas’ electricity markets a mistake
Supporters of electric deregulation frequently point to Texas as an example of how electric deregulation could work in Michigan.
However, things aren’t going so well in the Lone Star State, with rolling blackouts threatening the reliable electricity Texans depend on.
Just after seven a.m. on January 6, as Texans awakened to one of the coldest mornings in years, an email and social media alert went out from the Electric Reliability Council of Texas: “Reduce electric use now. Risk of power outages exist throughout Texas. Power warning in effect.” The last time a hard freeze gripped Texas so tightly, in February 2011, power blackouts rolled across much of the state as ERCOT, which operates the state’s power grid, struggled to meet the demand. Then, just as in January, power plants unexpectedly went offline when the state needed them most. This time blackouts were averted, but barely.
This isn’t the free-market wonderland that lawmakers envisioned back in 1999 when they voted to deregulate electricity, turning most of the state’s power system over to private companies. That decision, which was helped along by some arm-twisting from Houston’s Enron Corporation, was supposed to result in a robust market, thriving with competition, which would drive down prices for consumers, unleash a host of twenty-first-century innovations, and boost reliability by encouraging newer—and greener—generating plants. Texas, it was claimed, would become the envy of the nation for its cheap and abundant power, and the companies involved would make fat profits in the process. “Competition in the electric industry will benefit Texans by reducing monthly rates and offering consumers more choices about the power they use,” said a euphoric Governor George W. Bush.
Yet a dozen years after the launch of deregulation, which affects about 85 percent of the state, the system remains arcane and confusing to many consumers. The law eliminated the old monopolies and created three distinct divisions: generators, who produce the energy; transmission companies, which transport the electricity to people’s homes; and retailers, who buy electricity on the wholesale market and resell it to residents and small businesses. (Larger businesses, which often generate their own power, usually bypass the retailers.)